UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996
Commission File Number 0-11353
CIRCUIT RESEARCH LABS, INC.
(Exact name of registrant as specified in its charter)
Arizona 86-0344671
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2522 West Geneva Drive, Tempe, Arizona 85282
(Address of Principal executive office) (Zip Code)
Registrant's telephone number,
including area code
(602) 438-0888
172743 20 5
(CUSIP Number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by
this report.
Outstanding at
Class June 30, 1996
Common stock, $.10 par value 597,682
CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
INDEX
Page
number
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
June 30, 1996 (Unaudited) and
December 31, 1995 3
Consolidated Condensed Statements of
Operations - Three and six months ended
June 30, 1996 and 1995 (Unaudited) 5
Consolidated Condensed Statements of Cash
Flows - Six months ended June 30, 1996
and 1995 (Unaudited) 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7
Part II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
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CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
PART I. FINANCIAL INFORMATION
The Consolidated Condensed Financial Statements included herein
have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. The
Consolidated Condensed Balance Sheet as of June 30, 1996 and the
Consolidated Condensed Statements of Operations for the three and
six months ended June 30, 1996 and 1995 and the Consolidated
Condensed Statements of Cash Flows for the six months ended June
30, 1996 and 1995 have been prepared without audit.
Certain information and note disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these Consolidated
Condensed Financial Statements be read in conjunction with the
consolidated financial statements and notes thereto included in
the Company's Annual Report for the year ended December 31, 1995.
In the opinion of management, the Consolidated Condensed Financial
Statements for the unaudited interim periods presented herein
include all adjustments, consisting only of normal recurring
adjustments, necessary to present a fair statement of the results
of operations for such interim periods. Certain reclassifications
have been made to the financial statements for the six months
ended June 30, 1996 to conform to the statement classifications
used in the second quarter. Net operating results for any interim
period may not be comparable to the same interim period in
previous years, nor necessarily indicative of the results that may
be expected for the full year.
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CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
June 30, December 31,
1996 1995
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 75,732 $ 25,974
Securities available-for-sale 193,691 297,667
Accounts receivable, less allowance for
doubtful accounts of $16,520 140,128 162,242
Inventories:
Raw materials and supplies 380,595 437,368
Work in process 325,955 169,640
Finished goods 208,363 229,620
Total inventories 914,913 836,628
Prepaid expenses and other 71,263 67,243
Total current assets 1,395,727 1,389,754
PROPERTY, PLANT AND EQUIPMENT:
Land 130,869 130,869
Building and improvements 497,004 497,004
Furniture and fixtures 388,522 383,523
Machinery and equipment 605,025 564,734
Total 1,621,420 1,576,130
Less accumulated depreciation 1,019,080 981,978
Property, plant and equipment - net 602,340 594,152
OTHER ASSETS - NET 158,845 164,683
STOCKHOLDER NOTES RECEIVABLE 1,081
TOTAL $2,156,912 $2,149,670
(continued)
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CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
June 30, December 31,
1996 1995
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 89,671$ 91,401
Accrued salaries and benefits 48,274 58,004
Accrued professional fees 7,729 27,405
Accrued customer deposits 84,319 99,818
Other accrued expenses and liabilities 47,580 26,210
Long-term debt - current portion 19,663 19,136
Total current liabilities 297,236 321,974
LONG-TERM DEBT - LESS CURRENT PORTION 123,142 138,458
STOCKHOLDERS' EQUITY:
Preferred stock, $100 par value -
authorized
500,000 shares, none issued
Common stock, $.10 par value - authorized
20,000,000 shares, 597,682 shares
issued and outstanding 59,768 59,768
Additional paid-in capital 1,247,240 1,247,240
Retained earnings 429,526 377,324
Unrealized appreciation on securities
available-for sale 4,906
Total stockholders' equity 1,736,534 1,689,238
TOTAL $2,156,912 $2,149,670
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CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months ended
June 30, June 30,
1996 1995 1996 1995
NET SALES $599,761 $422,865 $1,238,292 $960,050
COST OF GOODS SOLD 245,301 138,940 505,585 317,498
Gross profit 354,460 283,925 732,707 642,552
OPERATING EXPENSES:
Selling, general and
administrative 261,282 249,682 523,966 496,166
Research and development 60,369 94,541 152,668 201,274
Total operating expenses 321,651 344,223 676,634 697,440
INCOME (LOSS) FROM OPERATIONS 32,809 (60,298) 56,073 (54,888)
OTHER INCOME (EXPENSE):
Interest and other income 3,461 7,167 8,466 13,173
Interest expense (5,250) (3,730) (12,287) (11,063)
Total other (expense)
income (1,789) 3,437 (3,821) 2,110
INCOME (LOSS) BEFORE INCOME
TAXES 31,020 (56,861) 52,252 (52,778)
INCOME TAX EXPENSE (BENEFIT) 50 (9,600) 50 (8,000)
NET INCOME (LOSS) $ 30,970 $(47,261)$ 52,202 $(44,778)
INCOME (LOSS) PER COMMON
SHARE $.05 $(.08) $.09 $(07)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 597,682 597,682 597,682 597,682
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CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1996 1995
OPERATING ACTIVITIES:
NET INCOME $ 52,202 $(44,778)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH USED IN OPERATING ACTIVITIES:
Depreciation and amortization 42,508 43,890
Changes in assets and liabilities:
Accounts receivable 22,114 61,269
Income taxes receivable ( 8,000)
Inventories (123,575) (34,359)
Prepaid expenses and other assets ( 3,588) (18,526)
Accounts payable, accrued expenses
and customer deposits (25,265) (2,852)
NET CASH USED IN OPERATING ACTIVITIES (35,604) ( 3,356)
INVESTING ACTIVITIES:
Purchase of securities (75,000) (74,318)
Proceeds from sale or maturity of
securities 174,070 146,712
Capital expenditures (20,840)
Payments received on stockholders' notes 1,081 3,381
NET CASH PROVIDED BY INVESTING ACTIVITIES 100,151 54,935
FINANCING ACTIVITIES:
Principal payments on long-term debt (14,789) (3,466)
NET INCREASE IN CASH AND CASH EQUIVALENTS 49,758 48,113
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 25,974 122,217
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 75,732 $170,330
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $12,288 $11,063
Test equipment transferred from Inventories
to Engineering Equipment $45,290
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CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
The Company had net working capital of $1,098,000 and the
ratio of current assets to current liabilities was 4.70 to 1 at
June 30, 1996. At December 31, 1995, the Company had net working
capital of $1,067,800 and a current ratio of 4.32 to 1.
Total inventories of $914,900 at June 30, 1996 were $78,300
higher than total inventories of $836,600 at December 31, 1995.
The increase in work in process and decrease in raw materials
inventories are due to production runs for the DP100 and SC100.
The Company's credit line of $200,000 was not utilized
during the quarter, and at June 30, 1996 had no outstanding
balance. The credit agreement expired on July 1, 1996, and since
it had not been used, the Company did not pursue its renewal. The
Company believes its future liquidity needs will be met by a
combination of cash generated from operating activities, the
reduction of investments, and existing cash balances.
The Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 115 in
May 1993 establishing certain new financial accounting and
reporting standards for investments in debt and equity
securities. SFAS No. 115 requires the classification of
securities at acquisition into one of three categories:
held-to-maturity, available-for-sale or trading -- with different
reporting requirements for each classification. All of the
Company's marketable securities are classified as
available-for-sale.
The Company adopted SFAS No. 115 as of January 1, 1995. At
December 31, 1995, the unrealized appreciation on securities
available-for -sale was $4,900. The estimated fair value of the
Company's securities approximates cost at June 30, 1996.
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CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the second quarter of 1996 totaled $599,800
and were 42% higher than the second quarter sales in 1995 of
$422,900. Of the total increase, 62% was due to shipments of CRL's
digital processor, the DP100, and CRL's RBDS unit, the SC100, and
38% was due to increased international demand for CRL's other
products.
Cost of goods sold was 41% of net sales for the second
quarter ended June 30, 1996 compared to 33% for the same period in
1995. The increase is the result of the expected lower profit
margins in the Desert Assemblies division. The profit margin on
CRL's main product lines for the second quarter ended June 30,
1996 was 67% which was consistent with the same period of 1995.
Selling, general and administrative expenses were $261,300
in the second quarter of 1996 compared to selling, general and
administrative expenses of $249,700 for the second quarter of
1995. The increase was due primarily to increased international
marketing costs.
Research and development expense in the second quarter of
1996 totaled $60,400, and was $34,100 lower compared to the 1995
second quarter total of $94,500. The decrease was due to lower
developmental cost on the new product lines and lower labor cost
resulting from not having contract engineers on staff.
Total other expense of $1,800 for the second quarter of 1996
was $5,200 less than other income of $3,400 for the second quarter
of 1995. The decrease was due to lower interest income from
investments.
Interest expense consisted of the interest cost on the
long-term mortgage collateralized by the Company's headquarters
facility.
The Company's income tax provision for the three and six
months ended June 30, 1996 is offset by the partial reversal of
the deferred tax valuation allowance recorded at December 31,
1995.
Net income for the second quarter was $31,000 as compared to
a net loss of $47,300 for the second quarter of 1995.
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CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
II. OTHER INFORMATION
Item 4. Submission of matters to a vote of security
holders
(a) The Company's Annual Meeting, May 3, 1996
(b) Meeting involved the election of Directors:
Mr. Ronald R. Jones
Mr. Gary D. Clarkson
Mr. Erle M. Constable
Mr. Carl E. Matthusen
Mr. Gary Hamker
Votes for 550,587
Votes against -0-
Abstaining 1,582
All of the above were renominated and reelected.
(c) Approval of Deloitte & Touche LLP as the Company's
independent auditors by the following vote:
Votes for 551,131
Votes against 438
Abstaining 662
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits included herein - None.
(b) Reports on Form 8-K - None.
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CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Registrant
CIRCUIT RESEARCH LABS INC.
DATE: August, 1996
BY /s/Gary D. Clarkson
Gary D. Clarkson
Treasurer (Authorized
Officer for signature)
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